London Forex Report: Fed rhetoric continues to be hawkish, spurring expectations the Fed is paving the way for a June rate hike. Fed Williams said the Fed is on track to raise rates in June or July despite Brexit risks. He reinforced the view both within the US central bank and in financial markets that overseas risks, even the Brexit vote he said would loom over next month’s decision, are not severe enough to delay rate hikes much longer. Meanwhile, Fed Bullard said extended period of low rates could cause financial instability in future, and stronger market expectations for a rate rise are “probably good”. PMI manufacturing in the US staged a surprised pullback to 50.5 in May while that of the Eurozone pulled back somewhat to 51.5, against expectations for a rise to 51.9. On a less downbeat note, PMI services managed to sustain at 53.1 based on May preliminary reading. USD Index retreated somewhat by 0.11% to 95.23 after paring earlier gains going into US trading session after the release of disappointing PMI manufacturing data.
FX Majors: EUR PMI manufacturing in the Eurozone pulled back somewhat to 51.5, against expectations for a rise to 51.9. On a less downbeat note, PMI services managed to sustain at 53.1 based on May preliminary reading. In a separate release, Eurozone consumer confidence index came in at -7.0 in May versus prior’s -9.3, an improvement but nevertheless marked consumers remained pessimistic albeit at a lesser extent. GBP While the pound just posted its best performance in three weeks, a measure of price swings anticipated in a month’s time (Implied Volatility) jumped to the highest since February as it encompassed the date of the 23 June referendum on Britain’s membership of the European Union. JPY Japan’s leading index rebounded stronger to 99.3 in March vs first estimate of 98.4. The stronger print was due to improvement seen in most sub sectors, led by strong traction seen in new manufacturing orders. Similarly, coincident index also rebounded for the month of Mar, with a stronger print of 111.1 versus previous reading of 110.7.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Technical: Prior support at 1.1280 now becomes resistance while this area contains upside reactions, bears now target symmetry support at 1.1065, only over 1.1450 eases immediate downside bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Technical: The second failure at 1.45 suggests further downside, as 1.4560 caps upside reactions expect a test of 1.44 next ahead of a retest of 1.4330
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: Retest of offers at 110.60/90 see sellers emerge, the subsequent failure at 109.50 opens a move to retest bids back towards 107.50, a close over 111.90 eases immediate bearish bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Bears now target weekly symmetry objective at 120.60. Intraday resistance at 124.20 only a close above 126.80 eases immediate downside pressure.
Retail Sentiment: Bullish
Trading Take-away: Short
Commodities FX: Gold moved lower as expectations that the Fed will hike interest rates as early as June rose, but prices came off their lows as late-day short covering entered the market. Oil prices slid as Iran vowed to ramp up output, though crude futures pared losses on data showing a stockpile drawdown at a major US delivery hub AUD Australian dollar struggled for traction yesterday, after three punishing weeks because of the diverging interest rate outlook for the Australia and the United States. Gains in equity markets and a bounce in iron ore prices helped but failed to garner a rally. CAD weakened to a six-week low against the USD as domestic retail sales figures released last Friday disappointed and oil fell. The mixed figures may leave the Bank of Canada on hold tomorrow, but the central bank may ease before year-end as the lack of momentum in the economy becomes more evident.
AUD/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: .7240/60 support erased now becomes intraday resistance as bears target .7050 as the next downside objective. Only a close over .7400 eases immediate downside pressure.
Retail Sentiment: Bullish
Trading Take-away: Short
USD/CAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: While 1.2960 supports bulls target offers at 1.3210 as the next upside extension target. Only a close below 1.2760 eases immediate bullish pressure.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
XAU/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Technical: 1288 is now resistance. The anticipated second leg of corrective price action is underway to test of the pivotal 1240, the medium term bullish bias would be questioned with a close below symmetry support at 1230
Retail Sentiment: Neutral
Trading Take-away: Neutral
US OIL
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: As 46.70 supports 50.00 becomes the material upside objective, with a symmetry swing target sited at 50.51 ahead of the larger AB=CD swing objective at 51.09, only a close below 43.00 threatens bullish bias.
Retail Sentiment: Bearish
Trading Take-away: Long
